Balance Sheet Method

Another name for the accounts receivable method.

Accounts Receivable Method

• selling goods or services on credit is important to business.

• however, businesses realize that when sales are made on account, some of these accounts receivable will be uncollectible.

• once an A/R is determined to be uncollectible, it is no longer an asset.

• the loss of an asset is an expense (uncollectible accounts expense).

• accounting principles require that in measuring income, revenue should be matched with the expenses incurred in raising the revenue.

• because the A/R may not become uncollectible until sometime later, the uncollectibles must be estimated and then matched.

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